IMC Rejects European Union Alarm Over "Citizenship By Investment"

Tom Burroughes

14 August 2018

An industry group representing individuals and firms operating what is sometimes dubbed the global market for “golden passports” has dismissed worries by a European Union commissioner that the programmes are a security risk.

The comments from the European Commissioner for Justice, Věra Jourová, calling for a report to be published in the autumn rather than December, prompted the , a Geneva-based body, to reject claims that the system was a threat.

“The Citizenship-by-Investment programmes run by EU sovereign states process a very small number of applications – approximately 700 to 1,000 per year. By comparison, according to Eurostat, in 2016 a total of 994,800 people obtained citizenship of an EU-28 Member State. Citizenship-by-Investment applicants therefore account for about 0.1 per cent of the total of new EU citizenships granted each year,” IMC chief executive Bruno L’ecuyer said.

“Citizenship-by-Investment applications are also vetted against current EU anti-money-laundering and financing of terrorism legislation, and must adhere to legal and regulatory obligations that individual EU states have adopted in line with EU law. It ensures the highest levels of corporate governance and due diligence are in place to prevent any security concerns,” he continued.

He responded to comments from the commissioner who was quoted by the Financial Times as saying: “In cases of any doubt, a person should not have the privilege of citizenship. We have no power to ban such a practice but we have an obligation to put high requirements on the member states to be careful. They are granting citizenship for the whole of Europe.”

Several EU states have such schemes: Malta and Cyprus, Austria, Greece, Hungary, Latvia, Lithuania and Portugal. And the UK, which is leaving the bloc, has for years operated its Tier I investor visa and entrepreneur visa regime. Further afield, the US, Canada, various Caribbean jurisdictions, Singapore and others (such as Australia with its points system) have schemes encouraging people to emigrate to these countries. Mauritius is in the legislative process of introducing a new system. Typically, such programmes offer residency/citizenship in return for a minimum investment, although amounts vary, from several hundred thousand dollars or the equivalent. These regimes have in turn spawned an industry of advisors, such as private client lawyers. One of the most prominent names in the sector is .

The programmes have come under political fire at times (as in the UK), sometimes on the grounds that they favour the rich without delivering sufficient benefit to a wider population. The IMC, meanwhile, has not been afraid to get its gloves off, such as in its attack on the programme of Hungary.

One industry figure, who asked not to be named, told this publication that the commissioner’s comments probably reflected a wider worry about the flow of Russian-sourced cash around the bloc.

Concerns that such EU programmes might be a security threat were dismissed by Peter S Vincent, assistant director general for international policy at BORDERPOL and former legal counsel at the US Department of Justice and US Department of Homeland Security.

“I can understand and sympathise with the EU Commissioner’s concerns. However, having been exposed to the industry for a few years now, I can honestly say that as a former security and counterterrorism professional, the citizenship by investment programmes of the EU are not a security threat to the European Union,” he said in the IMC statement.

The commissioner was quoted telling the FT that she was especially alarmed by Malta’s scheme, in which an individual can gain citizenship in return for a €650,000 ($740,716) contribution to the country’s development fund and the purchase or lease of property, as well as investments of at least €150,000 in stocks and bonds. Family members can be added for an additional fee of €25,000 to €50,000 per person.

The Maltese system was introduced in 2014 after the election of the Labour government led by Joseph Muscat. The FT said that the programme has brought a total of €590 million to the country from more than 700 investors, according to Identity Malta, the government body that runs the programme. Today, the government publishes names of persons who are granted citizenship.

In countries such as Spain and Portugal, programmes were unveiled at a time when they were seen as a way of boosting the recession-ravaged real estate market. Canada in 2014 cancelled a programme designed to attract high net worth Chinese people, saying it achieved insufficient benefit.